The Morning Edge: Trump Tariff, Canada-China retaliates

 The United States' imposition of steep tariffs on its top trading partners has triggered swift retaliation, intensifying global trade tensions. President Donald Trump's 25% tariffs on imports from Mexico and Canada took effect on Tuesday, alongside a sharp increase in duties on Chinese goods, doubling to 20%. The measures, impacting nearly $2.2 trillion in annual trade, have set the stage for economic uncertainty and potential price hikes for American consumers.

Canada retaliated with 25% tariffs on US $20.7 billion worth of US imports, including orange juice, peanut butter, and appliances, while Mexico pledged countermeasures, delaying details until Sunday. China imposed additional tariffs of 10-15% on select US imports and filed a complaint with the World Trade Organization. Despite hints of a partial resolution from Commerce Secretary Howard Lutnick, the economic fallout from these escalating trade wars remains uncertain.

Data
The European Union’s unemployment rate held steady at 5.8% in January 2025, while the eurozone’s rate remained at 6.2%, marking historic lows for the fourth consecutive month despite the region’s economic stagnation. Eurostat reported that 12.824 million people were jobless across the EU, with 8,000 fewer unemployed compared to December 2024. Spain, which has the EU’s highest unemployment rate, saw a slight improvement to 10.4% from 10.6%, while the Czech Republic and Poland recorded the lowest rates at 2.6%. Analysts warn that unemployment could rise in the coming months, as February PMIs from S&P Global revealed the fastest job cuts in the manufacturing sector in four and a half years. The potential impact of threatened US trade tariffs on the EU’s economy. With unemployment being a key factor in the European Central Bank’s policy decisions, the ECB is expected to cut its key interest rates, including the deposit rate from 2.75% to 2.5%, at its meeting this Thursday.

Markets
Overnight
US stocks closed lower on Tuesday, with the tech-heavy Nasdaq nearing correction territory. Financials and industrials led the declines on the S&P 500, with Citigroup and JPMorgan Chase falling 6.2% and nearly 4%, respectively, dragging the broader banking index down 4.7%. Automakers Ford and General Motors, heavily reliant on North American supply chains, dropped 2.9% and 4.6%, reflecting the widespread impact of the tariffs across key sectors. Trade tensions escalated following President Donald Trump’s new tariffs in Canada, Mexico, and China. The 25% duties on Mexican and Canadian imports, alongside doubled tariffs on Chinese goods, took effect immediately, prompting retaliation from China and Canada, while Mexico vowed to respond. The selloff underscored growing investor unease over the economic fallout from escalating trade conflicts. 

US Treasury yields for longer-maturity bonds reversed earlier losses on Tuesday following news that Germany’s conservatives and Social Democrats are proposing a €500 billion fund for infrastructure and plan to revise borrowing rules to increase defense spending. The yield on the benchmark 10-year Treasury note climbed 2.6 basis points to 4.206%, after initially falling to 4.106%, its lowest point since October 21. The announcement from Germany refocused attention on fiscal stimulus measures in Europe, reducing demand for safe-haven assets like US government bonds. 

The US dollar index, which measures the greenback against a basket of six major currencies, fell 0.9% on Tuesday, hitting its lowest level since December 6. The euro surged to a three-month high against the dollar after Germany’s conservatives and Social Democrats proposed a €500 billion infrastructure fund and plan to revise borrowing rules to boost defense spending. Other European currencies, including the Swiss franc, sterling, and the Norwegian and Swedish crowns, also gained ground on the German news, further pressuring the dollar. The shift reflected growing optimism about fiscal stimulus in Europe, while the dollar faced headwinds from escalating trade tensions and concerns over US economic policy.

Brent crude oil prices settled near multi-month lows on Tuesday, pressured by reports that OPEC+ plans to proceed with output increases in April and concerns over the economic impact of new US tariffs. Brent crude futures fell 58 cents, or 0.8%, to settle at $71.04 a barrel, after hitting a session low of $69.75—its weakest level since September. The combination of rising supply and fears of weaker demand amid escalating trade tensions weighed heavily on the market.

Day’s Ledger
Economy

• HSBC India Services and Composite PMI for February
• EUROZONE SERVICES PMI for February
• US ADP NATIONAL EMPLOYMENT REPORT for February
• US ISM REPORT ON BUSINESS SERVICES PMI for February
• EIA to release weekly petroleum status report.

Companies

• Bharat Electronics Ltd., to consider declaration of dividend.
• LIC Housing Finance board to discuss fundraising plans
• JHS Svendgaard Retail Ventures board to review fundraising proposals

Policy

• Oil, Gas, and Power Expo 2025 at Goregaon, Mumbai
• Bank of England Governor Andrew Bailey to appear before the Treasury Committee
   

Tickers

• ABB India’s subsidiary ABB Motion has announced a strategic investment through ABB Motion Ventures in the AI start-up UptimeAI, aiming to transform how industrial customers manage the health and performance of motors, drives, and related assets.
• ADANI WILMAR has signed a definitive agreement to acquire GD Foods Manufacturing (India), the owner of the 'Tops' brand.
• AMBUJA CEMENTS has informed that the Competition Commission of India has unconditionally approved the acquisition of a 72.8% stake in Orient Cement by Ambuja Cements.
• APOLLO HOSPITALS ENTERPRISE plans to commission a comprehensive Oncology Centre, including India's first Proteus One Proton System along with ancillary equipment, over the next three years at a cost of ₹2.50 billion.
• GRASIM INDUSTRIES has commenced the commercial production of Birla Opus Paints at its plant in Mahad, Maharashtra.
• JSW ENERGY has informed that The Competition Commission of India has approved the acquisition of KSK Mahanadi Power Company.
• OIL AND NATURAL GAS CORP's subsidiary, ONGC Green, has acquired a 100% equity stake in PTC Energy for ₹9.25 billion.
• OLA ELECTRIC MOBILITY has received a letter from IFCI regarding the non-achievement of Milestone-1 as per Schedule M of the Programme Agreement.
• Power Grid Corporation of India has been declared the successful bidder for three projects to establish an inter-state transmission system under the Build, Own, Operate, and Transfer (BOOT) basis.
• RAIL VIKAS NIGAM has received a Letter of Acceptance for a project worth ₹7.30 billion from Himachal Pradesh.
• WALCHANDNAGAR INDUSTRIES announced a deal to acquire a 60.3% stake in AiCitta Intelligent Technology, a company engaged in R&D and the manufacture of unmanned ground vehicles.

Must Read

• Govt slaps $2.8-billion demand notice to RIL, partners in decade-old natural gas migration dispute
• NSE changes expiry day of weekly derivatives contracts from Apr 4
• RBI directs large NBFCs to stop new lines of credit and renewals
• Committed to reducing regulatory burden: FM Nirmala Sitharaman
• Real estate sector to see record ₹600 crore launches in Jan-Mar
• Foxconn’s industrial PC unit makes India foray
• SEBI brings in stricter disclosure norms for IPO-bound companies
• China targets ‘around 5%’ GDP growth in 2025 amid trade war
• Trump’s Goal in Trade War Is to Annex Canada, Trudeau Says
• Arab states adopt Egyptian alternative to Trump's 'Gaza Riviera'
• BlackRock to buy Hong Kong firm's Panama Canal port stake amid Trump pressure
   

Daily Mantra
Don't dwell on what went wrong. Instead, focus on what to do next. Spend your energies on moving forward toward finding the answer.

Musings

 

India’s Middle Class: Aspirations Rise, Savings Fall, Debt Soars

India’s middle class is saving less & borrowing more than ever. Over the past decade, stagnant incomes & rising costs have fueled a debt-driven consumption boom.

Stagnant Income: Avg. annual income of 53% of taxpayers earning ₹750,000–₹10 million arely moved: ₹1.023 million  (2013-14) → ₹1.069 million (2023-24). (Source: IT Dept, MoF)

Debt Dependence:
• 67% of Indian families have taken personal loans.
• 17% of borrowers juggle credit card debt, personal loans & another high-ticket loan.
• 7% of borrowers are likely subprime
• Up to 10% of retail borrowers may be in a debt trap.

Savings Drop:
• Gross domestic savings rate: 34.6% of GDP (2012) → 29.3% (2023).
• Household savings rate: 23.6% of GDP (2011-12) → 18.4% (2022-23).

Shift in Lending: Since 2015, banks moved from corporate corporate lending to aggressively marketing retail loans, fueling household debt.

What do you make of it?  - Chetan Chandak 

Chetan is a published author and a dabbler in mysticism. By day, he trades currency derivatives at an Indian private bank; after hours, he delves into ideas beyond the numbers. His musings—part reflection, part curiosity—are his own and don’t represent views of his bank.